By Harish Sridharan
(Reuters) -National Australia Bank Ltd posted a near 6% rise in third-quarter cash profit on Tuesday as it benefited from an increase in home and business loans, while surging interest rates helped improve margins.
Runaway inflation has prompted the Reserve Bank of Australia to tighten monetary policy this year, aiding the margins of banks that grappled with record-low interest rates and stiff competition in the home-lending market for the past two years.
Melbourne-based NAB, as well as other members of Australia's "Big Four", have entirely passed on to customers the 175-basis-point increase in interest rates since May.
"As the economy changes, continued low unemployment and healthy household and business balance sheets are helping mitigate the impacts of higher inflation and higher interest rates," said Chief Executive Ross McEwan.
He added that 70% of customer home loan repayments were ahead of schedule.
The lender, however, bumped up its cost forecast for 2022 to between 3% and 4% from 2% to 3%. That excludes the impact of its $882 million buyout of Citigroup's local consumer business, which became effective on June 1.
Part of the cost jump comes from expected provisions of between A$60 million and A$100 million ($41.92 million and $69.86 million) for matters related to suspected serious breaches of anti-money laundering and counter-terrorism laws.
Excluding its markets and treasury business and the impact of the Citi acquisition, NAB's net interest margin for the April-June quarter was slightly higher than the first half's quarterly average.
Cash profit at Australia's second-largest lender was A$1.80 billion, compared with A$1.70 billion a year ago. The figure was in-line with a Morgan Stanley estimate of A$1.80 billion.
Common equity tier 1 (CET1) ratio, a closely watched measure of spare cash, fell to 11.6% at June-end from 12.5% at March-end.
($1 = 1.4314 Australian dollars)
(Reporting by Harish Sridharan and Sameer Manekar in Bengaluru; Editing by Aditya Soni)